CHAPTER 5: IS THE UNITED NATIONS GOOD VALUE FOR THE MONEY?
What is the UN doing to ensure its continuing effectiveness?
In recent years, the UN has enacted major reforms to enhance its efficiency and effectiveness, and additional reforms were adopted by the General Assembly at the outset of its 60th anniversary session in September 2005.
As Secretary-General, Kofi Annan has put in motion the most far-reaching set of reforms ever proposed to the General Assembly. These have included measures to: reduce operating expenses; cut high-level posts; eliminate some 2,000 positions; reallocate resources from low-priority areas and administrative services to higher priority areas identified by Member States; reduce administrative costs and funnel the savings into development activities. He also oversaw reduction of the UN budget to 1994 levels, where they remained, in real terms, for 12 years.
During his first term (1997-2001), the Secretary-General undertook significant structural reforms as well, organizing the UN's work programme into four core areas: peace and security, development, economic and social affairs, and humanitarian affairs - with human rights as a cross-cutting issue. He appointed a Deputy Secretary-General to oversee the day-to-day work of the UN and coordinate its reform efforts, and established a cabinet comprising the UN senior managers to speed decision-making and enhance coordination. He also created an Office of Internal Oversight Services - whose work involves audits, evaluations, monitoring, inspections and investigations - and appointed an Under-Secretary General to lead it.
The Secretary-General has taken action in all areas of reform under his authority. On other aspects of UN reform, the decisions must come directly from Member States, acting together. In the Outcome Document of their 2005 "World Summit", world leaders agreed on a wide range of additional reforms, including the creation of a Peacebuilding Commission to help countries transition from war to peace; the establishment of a UN Human Rights Council; and development of a UN Ethics Office.
How much does the UN cost?
The regular budget of the UN is nearly $1.9 billion per year. It pays for UN activities, staff and basic infrastructure but not peacekeeping operations, which have a separate budget. All States of the UN are obligated by the Charter - an international treaty - to pay a portion of the budget. Each State's contribution is calculated on the basis of its share of the world economy.
How much does the entire UN system spend each year?
The UN system spends some $15 billion a year, taking into account the United Nations, UN peacekeeping operations, the programmes and funds, and the specialized agencies, but excluding the World Bank, the International Monetary Fund (IMF) and the International Fund for Agricultural Development (IFAD). Around half of this amount comes from voluntary contributions from Member States, the rest from mandatory assessments on those States.
The United Nations and its agencies, funds and programmes - mainly the UN Development Programme, the World Food Programme, the UN Children's Fund and the UN Population Fund - spend some $10 billion a year on operational activities for development, mostly for economic, social and humanitarian programmes to help the world's poorest countries. In addition, the World Bank, the IMF and IFAD provide billions more annually in loans that help to eradicate poverty, foster development and stabilize the world economy.
World military expenditures - a staggering $1 trillion plus annually - would pay for the entire UN system for 67 years
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THE UN: THE BENEFITS FOR BUSINESS
The work of the United Nations benefits business all over the world.
- The business community and the UN share common interests in promoting economic growth and stability, creating employment and stimulating investment. UN work - such as electoral assistance, the promotion of literacy and the eradication of disease - helps to build stable, functioning, democratic societies. It provides the "soft investment" without which private investment could not reap a return.
- UN initiatives to promote exports, remove trade barriers, promote uniform trade laws and protect copyrights benefit businesses everywhere.
- The UN system defines technical standards in telecommunication, aviation, shipping and postal services, which make international transactions possible.
- UN efforts to advance market-oriented reforms, facilitate business transactions and develop business-friendly legislation help stimulate direct foreign investment in developing countries, which amounted to $233 billion in 2004, according to the United Nations Conference on Trade and Development (UNCTAD).
- The UN system is a major purchaser of goods and services, totalling over $6.4 billion a year. UNICEF buys half the vaccines produced worldwide, while the UN Population Fund is the world's largest purchaser of contraceptives.
- U.S. companies are consistently the largest sellers of goods and services to the UN. In 2004, companies from the United States earned nearly $316 million through procurement done by UN Headquarters in New York - more than 24 per cent of total procurement.
- The UN system increasingly engages in joint ventures with the private sector and intergovernmental organizations for various projects, including the provision of web-accessed satellite imagery, maps and other geographic information for areas where UN agencies and non-governmental organizations are providing humanitarian assistance or carrying out post-conflict rehabilitation and reconstruction.
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How does the UN budget compare with those of other organizations?
To gain some perspective on the UN's expenditures - nearly $1.9 billion per year for the UN alone and about $15 billion for the entire UN system - compare them with expenditures by governments and by other bodies:
- Metropolitan Tokyo's Fire Department has a budget of 237.5 billion yen (approximately $2.2 billion).
- Time Warner, the media conglomerate, spent nearly $3.3 billion on advertising in 2004.
- The administrative budget of the 25-country European Community for 2004 amounted to €5.73 billion (approximately $7.3 billion).
- The annual budget of the New York City Board of Education - not counting pensions and debt-servicing costs - amounts to some $12.4 billion.
- Bonuses paid out on Wall Street for 2005 rose to an all-time high of $21.5 billion.
- The World Health Organization (WHO) - which has dramatically reduced or eliminated entirely the incidence of a number of diseases worldwide, including smallpox and polio - has an annual budget of $440 million. That's less than the cost of a luxury liner (more than $450 million for Holland America Line's "Grand Princess") or the new baseball stadium to be built in Washington, D.C. (at least $535 million).
How is the UN budget decided?
UN spending is determined through a rigorous process involving all Member States. The budget is initially proposed to the General Assembly by the Secretary-General, after careful scrutiny of requests from individual UN departments. It is then analyzed by the 16-member Advisory Committee on Administrative and Budgetary Questions and by the 34-member Committee for Programme and Coordination. The Committees' recommendations go to the General Assembly's Administrative and Budgetary Committee, made up of all Member States, which gives the budget further scrutiny. Finally, it is sent to the General Assembly for final review and approval.
Since 1988, the budget has been approved by consensus - a practice that gives countries the leverage to restrain increases.
Is the budget growing too fast?
In real terms - that is, after allowing for inflation and currency fluctuations - the budget has declined significantly over the past decade, despite constant demands from Member States for new programmes and activities.
From 1994, when the Assembly adopted a two-year budget of just over $2.6 billion, through 2005, the Secretariat carried out its work with the same or a lower level of resources. The budget for 2006-2007, at $3.79 billion, is only nominally more, in real terms, than the 1994 budget - which was equal to some $3.5 billion in 2005 dollars.
Bonuses paid out on Wall Street for 2005 exceed the budget of the entire UN system by over $6 billion!
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Who watches spending at the UN?
Internal controls are in place to ensure that money is spent only for authorized purposes and as efficiently as possible.
- The UN Office of Programme Planning, Budget and Accounts, headed by the UN Controller, is the main control mechanism. Each specialized agency and major programme of the UN system has its own control office.
- The UN Office of Internal Oversight Services, headed by the equivalent of an Inspector General in the United States, reviews UN activities throughout the world and looks into allegations of waste, fraud, abuse and mismanagement. Since it began operations in 1995, the Office has helped the UN save or recover some $130 million. It reports directly to Member States at the General Assembly, and maintains a confidential hotline to receive information on alleged wrongdoings.
- The Board of External Auditors goes over the accounts. It consists of the Auditors-General of three Member States chosen by the Assembly. Each Auditor-General appoints a staff of auditors who inspect UN offices all over the world.
- The Joint Inspection Unit helps ensure that the activities of the various organizations of the UN system are carried out in the most economical manner and that optimum use is made of resources. The Unit consists of inspectors from 11 nations, appointed by the General Assembly. They have broad powers of investigation in all matters bearing on efficiency and the proper use of funds, and can make on-the-spot inquiries.
The UN Internal Oversight Services Office has helped save or recover some $130 million since 1995
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How are membership dues calculated?
The primary criterion applied by Member States, through the General Assembly, is a country's capacity to pay. This is based on estimates of their gross national product (GNP) and a number of adjustments, including for external debt and low per capita incomes. The percentage shares of each Member State in the budget are decided by the General Assembly based on this methodology and range from a minimum of 0.001 per cent to a maximum of 22 per cent, and a maximum of 0.01 per cent from least developed countries. For 2005, the 47 countries contributing at the minimum rate were assessed $14,360 each. The largest contributor - the United States - was assessed $362,852,996.
Top 10 Member States in assessment for the UN regular budget, 2005
Assessment rates/amount |
| Country |
(per cent) |
($millions) |
| United States |
22.00 |
362.7 |
| Japan |
19.47 |
279.6 |
| Germany |
8.66 |
124.4 |
| United Kingdom |
6.13 |
88.0 |
| France |
6.03 |
86.6 |
| Italy |
4.89 |
70.2 |
| Canada |
2.81 |
40.4 |
| Spain |
2.52 |
36.2 |
| China |
2.05 |
29.5 |
| Mexico |
1.88 |
27.0 |
Are the dues unfairly distributed?
Since the assessments are based on gross national product (GNP), richer countries generally pay more and poorer countries less, although there are some exceptions (e.g., Brazil pays more than Liechtenstein even though its per capita income is much lower, because its total GNP is much higher). As a result, the top 10 contributors pay 76.44 per cent of the regular budget.
Beginning in 1974, the Assembly fixed a maximum rate of 25 per cent for any contributor - later reduced to 22 per cent from 2001. So far, this ceiling has benefited only the United States, whose share of total membership GNP is approximately 27 per cent. Without this ceiling, its share would be even higher since, like other countries with high per capita income, it would have been required to contribute to the cost of reductions for the countries with low per capita income. The rates of other Member States are raised to make up for the difference.
The country with the second-highest assessed contribution is Japan, which was assessed some 19.5 per cent for 2005, or $279.6 million. The 25 members of the European Union together contribute some 37.5 per cent of the budget. The scale of contributions is reviewed every three years on the basis of the latest national income statistics to ensure that assessments are fair and accurate.
Are industrialized countries paying too much?
When the States contributing to the UN regular budget are ranked by the amount of their contribution, it is clear that a small number of countries are assessed a large share of the costs - reflecting their larger share of world income. If other criteria are used, however, a different picture emerges. If we look at per capita contributions, for example, we see three smaller countries and four Nordic States among the top contributors.
A large share of the money that some major industrialized countries give to the UN system returns to them in terms of the money the UN spends in their countries on materials purchased, salaries and operating expenses. Of the $6.44 billion in goods and services purchased by the entire UN system in 2004, 59.5 per cent came from industrialized countries, totalling some $3.8 billion. U.S. companies received $637 million of this - more than double that of the next largest provider of goods and services, and far more than most Member States.
Top 10 per capita contributors to the UN regular budget, 2005
| Country |
($amount) |
| Luxembourg |
3.49 |
| Switzerland |
3.31 |
| Japan |
3.06 |
| Liechtenstein |
3.03 |
| Norway |
3.01 |
| Denmark |
2.69 |
| Iceland |
2.38 |
| Qatar |
2.14 |
| Austria |
2.13 |
| Netherlands |
2.10 |
What about unpaid dues?
Over the past two decades, the UN has often been in a state of financial crisis - what happens when Member States do not pay their share of costs for the programmes they have mandated. Some countries fail to pay their dues on time due to budgetary technicalities or simple poverty. Others have withheld payments as a way to exert political pressure or to make a political point. No State or private company could function under such conditions, with Member States continuing to ask more and more of the UN, even as dues are withheld.
As of 31 December 2005, arrears to the regular budget totalled $333.4 million - of which $314 million was for the current year. In addition, $24.9 million was owed in arrears relating to the International Tribunals for the former Yugoslavia and for Rwanda, and $10.2 million with respect to the Capital Master Plan for renovation of the UN's physical premises in New York.
When one adds in UN peacekeeping, total unpaid contributions jumps to $3.3 billion, with $2.9 billion owed for peacekeeping alone. Some 33.8 per cent of total arrears - over $1.1 billion - represented outstanding contributions by the United States, with $767.7 million relating to the current period and $343.2 million to prior periods. This difficulty was compounded in the closing days of 2005 when the General Assembly, in order to achieve consensus on its $3.79 billion budget for the biennium 2006-2007, added a provision by which spending authority was limited to $950 million for the first half of 2006. Since expenses are expected to reach some $1.9 billion during the year, the Secretary-General will have to return to the Assembly at some point for additional spending authority to keep the UN operational.
It is essential that Member States demonstrate their commitment to the purposes and principles for which the UN was founded by meeting their financial obligations in full and on time. This alone can restore the Organization to financial stability and ensure its ability to continue its noble mission with maximum impact and benefit to the people of our planet.
What can be done to make Member States fulfil their financial obligations?
Under the UN Charter (Article 19), a Member State can be deprived of its vote in the General Assembly if its arrears equal or exceed the amount of the contributions due from it for the previous two years. Various Members have suffered this sanction over the years.
Has the UN made the world a better place?
While some achievements of the UN family are well known, many of them, which benefit people everywhere, are often taken for granted:
- The UN and its agencies have improved the health of millions - immunizing the world's children, fighting malaria and parasitic disease, providing safe drinking water and protecting consumers' health. As a result, longevity and life expectancy have increased worldwide.
- More international law has been developed through the UN in the past six decades than in the entire previous history of humankind.
- UN relief agencies together provide aid and protection to some 23.3 million refugees and displaced persons worldwide.
- The UN in 1948 formulated the Universal Declaration of Human Rights - an historic proclamation of the rights and freedoms to which all men and women are entitled. Some 80 United Nations treaties protect and promote specific human rights.
- The UN and its agencies, including the World Bank and the UN Development Programme (UNDP), are the premier vehicles for furthering development in poorer countries, providing assistance worth more than $30 billion a year.
- The UN has helped strengthen the democratic process by assisting elections in more than 85 countries.
- UNDP is the UN system's principal provider of advice, advocacy and grant support for development. With an annual expenditure of about $1 billion, UNDP supports many development projects worldwide.
- UN appeals raise over $2 billion a year for emergency assistance to people affected by war and natural disaster. In 2004 alone, 31 inter-agency appeals raised more than $2.2 billion to assist millions of people in 30 countries and regions. In 2005, owing in part to the Indian Ocean earthquake-tsunami, inter-agency appeals raised $3.2 billion for relief efforts.
- The World Food Programme - the world's largest food-aid organization - raised nearly $3 billion to feed 113 million people in some 80 countries in 2004.
- The UN was a promoter of the great movement of decolonization, which led to the independence of more than 80 nations.
- Smallpox was eradicated from the world through a campaign coordinated by the World Health Organization (WHO). Another WHO campaign, launched in 1988, aims to eliminate polio. In 1998, polio struck nearly 1,000 people per day in 125 countries. By late 2005, there were only 1,392 cases worldwide, and the disease had been eliminated from all but 16 countries.
- Every year, up to 3 million children's lives are saved by immunization, but almost 3 million more die from preventable diseases. UNICEF, WHO, the World Bank Group, private foundations, the pharmaceutical industry and governments have joined in a Global Alliance for Vaccines and Immunization that aims to reduce that figure to zero.
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